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Fewer fumes vs. fewer cars The road ahead for PGMs

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Despite the slowdown in the automotive sector, the race across the globe to implement more-stringent emissions regulations has created an opportunity to increase the use of platinum group metals (PGMs) in catalytic converters. The outcome in the United States, however, could be very different than in Europe.

Auto catalysts typically use a ceramic or stainless steel honeycombed substrate with catalysts such as platinum, palladium and rhodium to remove toxic emissions from an internal combustion engine. Gasoline auto catalysts mostly utilize palladium in combination with rhodium, while diesel catalysts largely use platinum. This means that in Europe, where diesel cars are more prevalent, more platinum is used, while palladium is the metal of choice in the United States, where gasoline is the standard fuel.

Virtually all forecasts see a softening in vehicle demand in 2009, but auto catalyst producers hold an important trump card, according to David Jollie, precious metals market analyst and publications manager at catalytic converter producer Johnson Matthey Plc. In addition to improving the environment, new emissions standards should lead to the use of more industrial precious metals in the automotive industry. "(New emissions standards) will go a long way toward cushioning some of the softness in the (auto catalyst) market," he said in a telephone interview from the company's London office.

In the European Union, the next generation of emissions standards, commonly known as Euro 5, are scheduled to be implemented later this year. The law places caps on pollutants from diesel and gasoline cars, limiting nitrogen oxides and particulate matter.

"For gasoline cars it's really a tightening (of the standards). You will still have three-way catalysts, which are largely palladium and rhodium, but new models will tend to have higher (platinum group metal) loads in order to meet the new regulations," Jollie said.

On the diesel side, most vehicles will be equipped with diesel particulate filters in addition to platinum or platinum/palladium diesel oxidation catalysts. "Probably about 40 or 50 percent of light vehicles already have a diesel particulate filter, but that number is going to rise this year in order to meet the (new) legislation. Currently people are installing these for tax reasons or environmental reasons, but as we move toward Euro 5 being implemented it will be much more of a legislation-driven push," he said.

This will be a positive trend for platinum because diesel particulate filters are platinum-rich, Jollie said, although increasingly palladium also is being used alongside platinum in more-advanced diesel technology. "We still expect demand in Europe to fall for auto catalysts, but things will be tempered by this new Euro 5 legislation," he added.

In 2008, European auto catalyst demand for platinum rose 16.2 percent to 2.4 million troy ounces despite Western European vehicle production falling about 2.4 percent to 15.8 million units, according to Johnson Matthey.

One growth region is China, which is phasing in more-rigorous emissions standards. The new law, which is analogous to Euro 4, will go into effect nationwide next January for heavy-duty vehicles and six months later for light-duty vehicles. "Essentially what you have right now in China is Euro 3 nationwide. That has been introduced fairly recently. They are trying to address the areas with the worst pollution, where they are currently introducing Euro 4, which is Europe's current stage," Jollie said. "(Euro 4) has already been implemented in Beijing and Shanghai. It's going to be introduced sequentially into the big cities and eventually nationwide. It's hard for them to meet these standards without high-quality fuel, but they are tightening standards."

The impact of the new laws is that every new passenger vehicle in China should now be equipped with an auto catalyst. "Even though car engines are smaller than they are in the United States there is still (a) strong growth story, but it's mostly a palladium/rhodium growth story because it's a gasoline market." Chinese palladium purchases by the auto catalyst sector last year jumped 59 percent from 2007 to a record 410,000 ounces.

The story in the United States is a little more complex. There are currently two sets of relevant emissions regulations—federal standards and stricter California rules.

President Obama has directed federal regulators to approve an application by California and 13 other states to set strict auto emissions and fuel efficiency standards. The California rules will result in higher palladium and rhodium use in auto catalysts, although not nearly as much as in Europe, where emissions standards are already higher, Jollie said. "The PGMs will rise a little bit, but then the (manufacturers) will thrift them back down," he said. "They (platinum group metals) levels won't change (in the United States) as much as you might think." A slowdown in U.S. auto production could have a much greater negative impact on platinum group metals use in auto catalysts than any benefit gained by tighter emissions standards, he added. North American automotive palladium demand fell by an estimated 20.6 percent last year to 1.35 million ounces and is expected to suffer greater losses in 2009.

But while new emissions standards will be a positive for platinum group metals use, the introduction of technology that thrifts precious metals could be a negative. Mazda Motor Corp., for example, said it has developed a new technology for auto catalytic converters that uses roughly 70 percent less precious metals than previously.

The new nanocatalyst will be introduced first in the Mazda3 going on sale around the world this year. It requires just 0.15 grams per liter of precious metals vs. 0.55 g/L in the previous model. Going forward, the Japanese automaker said it will progressively introduce the single nanocatalyst to all its global markets, "which will contribute to a reduction in the consumption of rare metals and cleaner vehicle exhaust emissions."

There have been many technological breakthroughs in the past decade that claim to reduce platinum group metals use, but most haven't gained traction because they haven't proven cost effective to implement on an industry-wide scale, Jollie said. "We've looked at (the Mazda) announcement. What they said is really a reflection of what is going on anyway. There's a constant drive to reduce precious metal costs. Personally, I don't think the Mazda technology marks a quantum leap forward. It's just part of the general trend of people trying to minimize PGM loadings."

A spokesman for South African miner Impala Platinum Holdings Ltd. said platinum group metals use shouldn't suffer significantly due to the introduction of Mazda's new single nanocatalyst. Tom Jennemann

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